Because Snap has never been profitable, Shen looked at the price-to-revenue ratio for Snap and several of its peers, rather than the more conventional price-to-earnings ratio normally used when valuing a stock.

Snap’s IPO valuation of $US23.8 billion and 2016 revenue of $US404.5 million gives a ratio of 58.8. Shen noted that Snap’s price-to-revenue ratio was much higher than those of a lot of other big tech companies at the time of their IPOs.

The closest ratio, according to Shen, was Twitter’s, with the social media company’s IPO valuation being 44.8 times its revenue.